Daimler and Renault have confirmed they will co-operate on platform and drivetrain sharing.
The tie-in will involve Mercedes, Nissan, Smart, Renault and Infiniti working together on new models. Both partners are at pains to stress that the tie-in will not effect their brand identities, saying they will use the partnership to drive down costs on shared parts, but continue to engineer in specific parts to ensure differing characteristics of their products.
Dieter Zetsche, chairman of the board of Daimler, said: "Our skills complement each other very well. Right away, we are strengthening our competitiveness in the small and compact car segment and are reducing our CO2 footprint - both on a long-term basis.
"We know that we can make brand-typical products based on shared architectures. The individual brand identities will remain unaffected."
Renault-Nissan chairman Carlos Ghosn added: "This agreement will create lasting value for the Renault-Nissan Alliance and Daimler as we work on broadening and strengthening our product offering, efficiently utilising all available resources and developing the innovative technologies required in the coming decade."
Renault-Nissan and Daimler estimate the deal will save them each two billion euros over the next five years.
A similar deal between Daimler and BMW broke down last year due to differences in engineering philosophy on small cars and engines. BMW will now seek closer working ties with PSA.
At the heart of the Daimler/Renault co-operation is Project Edison - an initiative to create a platform to underpin the next Smart Fortwo, Forfour and the Renault Twingo. These models will use a rear-engine/rear-wheel drive layout, while the Smarts will also feature today’s Tridion safety cell, which is considered a unique selling point for the Smart brand.